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All Journal Journal of Regional Economics Indonesia
Haq, Maulaya Arinal
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Economics, Econometrics & Finance

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Investment, Absorptive Capacity, and Regional Economic Growth: Explaining Heterogeneous Outcomes across Indonesian Provinces Rusmiati, Rusmiati; Utari, Gaetri; Haq, Maulaya Arinal
Journal of Regional Economics Indonesia Vol. 7 No. 1 (2026): February 2026
Publisher : University Merdeka Malang

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.26905/jrei.v7i1.16861

Abstract

Regional economic growth remains a central concern in development economics, particularly in countries characterized by spatial disparities such as Indonesia. This study examines the relationship between investment and regional economic growth through a structured review of empirical studies published between 2018 and 2025. The analysis synthesizes findings from provincial-level research employing various econometric approaches, including panel data models, regression analysis, and path analysis. The results indicate that investment—both domestic and foreign—generally exerts a positive effect on regional economic growth. However, the magnitude and significance of this effect vary across regions. Evidence suggests that investment effectiveness depends on complementary factors such as human capital quality, infrastructure availability, macroeconomic stability, and institutional capacity. In regions with limited absorptive capacity, investment does not automatically translate into sustained growth. These findings highlight that investment-driven growth is conditional and requires integrated development policies to achieve inclusive and balanced regional economic performance.
Co-Authors Rusmiati Rusmiati Utari, Gaetri